By: Roger W. Reed May 11, 2006

Using Financial Incentives To Change Employee Behavior

What Employers Have

What Employers Have

“A nearly unprecedented confluence of demographic and lifestyle factors have made diabetes one of the most serious health-related problems confronting employers today”

“Census stats show health insurance coverage decline”

“Firms shift health costs to workers” “Benefits driving up labor costs” “Consumer-driven plans garner interest” “Rising health premiums affect workers” “Health costs impact business operations”

HEADLINES:

Healthy Employees

Increased Productivity

Lower Medical Claims Costs

What Employers Want

Health & Behavior

"Individual behavior drives 50% of the health care spending in this country today. There are ways to provide incentives that lead to better behavior that don't have to punitive."

Lewis Devendorf, a principal at Mercer Human Resource Consulting

A Promising Solution:Wellness Intervention Programs (WIP)

Employer interest in WIP is strong 75-90% offer some form of WIP (Leonard 2001)(Hewitt

2004)(Watson Wyatt 2005)

“Jury still out” on long term effectiveness Effective for participants who adhere and sustain Key challenge – increasing participation, adherence, long-

term behavioral change (Kaplan 1984, Lovato et al. 1990, Hennrikus 2002)

Only 50% provide incentives for employees to improve or maintain health (Watson Wyatt, December 2005)

Social Forces Arrayed Against Health Behavioral Change

Political gridlock and tight budget constraints conspire to thwart breakthrough thinking and risk-taking on

health policy, financing and health delivery

Array of destructive social, cultural pressures Sedentary lifestyles (work, outside activities - TV, video

games, spectator events, etc.) Peer pressure (Cab it or Drive it, Don’t Walk) Food industry (Super Size Me) Fast Paced Lifestyles – (No time for exercise) Advertising/Media (Promotes tobacco, alcohol, high fat

foods)

Motivational Realities

Unhealthy behavior often provides stimulation or comfort

Healthy behavior usually requires denial, withdrawal, sacrifice and fatigue

Participants want immediate results and rewards

INCENTIVES: What, Why, Who

What’s An Incentive?

An anticipated positive or desirable reward designed to influence the performance of an individual or group.

Why Use Incentives?

Wellness is largely voluntary Voluntary means it requires a continual act of will Voluntary behavior is performed for a purpose or set

of reasons Some things help maintain the old behavior Some things help the adoption of a new behavior Incentives help “unbalance” the status quo which can

help lead to change or maintain change Incentives can help increase participation and

support healthier behaviors

Absolute Advantage, The Workplace Wellness Magazine, Volume 4, No. 7, 2005

Why Use Incentives?

Increase participation Provide catalyst for behavior change that can

improve the health of the individual Add another component to change process

Absolute Advantage, The Workplace Wellness Magazine, Volume 4, No. 7, 2005

Motivate Participation

Who’s Using Incentives?

In a 2004 survey by the Society for Human Resource Management

67% of HR professionals said their organization provides incentives to encourage healthy behavior

46% indicated their organization gives health care quality information to workers

Who Is Using Incentives?

2005 Employee Benefit News QuickPoll

22% of respondents said their company offers financial incentives for employees to practice healthy habits

37% said they were considering doing so

41% said their company does not provide such incentives.

Benefit News, September 15, 2005, Carlson, Leah

Some Employers Offering Incentives

Roundy’s Inc. - $75 Per Week Premium Differential For Wellness Participation

Bank of Geneva – Up to $2,000 credit for healthy lifestyles that can be used against $2,500 plan deductible

Wells Fargo - $50 to $150 with Max of $500 per year for participation in health improvement

IBM - $150 incentive for each for not smoking, exercising and completing a health assessment

What Our Clients Are Doing

N=93 Employers 22.6% use gift cards in some capacity 20.4% use inexpensive gift items (water bottles, pedometers) 30.1% use health insurance premium differential (dis)incentives 5.4% use reduced Rx co-pays 6.4% use chance incentives of some kind (e.g., drawing) 29.0% use a year-end incentive, typically cash upon program

achievement 14.0% use a 6-mo incentive, typically cash upon mid-point

achievement 43.0% use a periodic incentive (administered monthly or quarterly)

of some kind (most benefit integrated) 11.8% use an incentive tied to screenings or enrollment (often in

combination with PHA completion) 48.4% use PHA completion incentives (doesn’t include benefit

integrated) 39.8% use incentives that are taxable 58.1% offer incentives to spouses

Motivational Theory

Constructs hypothesized to influence health behavioral change

Perceived self-efficacy (Bandura 1977) Outcome expectancies ((Schwarzer 1999) Perceived risk (Schwarzer 1999) Barriers and resources (Schwarzer 1999) Prior experience (Godin et al. 1987) Value of Health (O’Donnell 1994) Social support (peer, authority) (O’Donnell 1994) Intention (Abraham et al. 1998, Schwarzer 2000) Transtheoretical model (Stages of Change)

(Prochaska and Lee 1998)

Conceptual Framework Of Behavioral Change(based on Schwarzer 1999)

OutcomeExpectancies

HealthNon-health

RiskPerception

Intention Planning

   

Initiative 

Maintenance

 Recovery

Action

Barriers and Resources

PerceivedSelf-Efficacy

 Dis

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PriorExperience G

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Me

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Su

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Be

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Ch

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Social Support-peer-authority

HealthValues

INCENTIVES

Gordian’s analysis of 100 clients incentive data found:

•$20 to $30 PEPM ($240 to $360 PEPY)•Confidence Interval = .95•Required to get significant movement towardsgreater participation

Incentives: How Much Is Enough?

Voluntary 10% to 20%

Simply communicate the health benefits

Types of Incentives

Types of Incentives

Achievement Awards 20% to 40%

T-shirts to T-Birds

Types of Incentives

Financial Incentives 50% to 90%

Days off, Cash awards, Gift Certificates, etc.

Impact of Incentives

The greater the participation, the

greater the impact on health status and healthcare costs

The greater the incentive, the greater

the participation

Benefits-Integrated Incentives

Financial Incentives (days off, cash awards, etc.)

Voluntary

Achievement Awards(merchandise)

P A R T I C I P A T I O N

INCENTIVES

CASE STUDY – 236 Bed Hospital

YEAR 1 - low-key approach, small financial incentive 36 percent of those eligible completed a health

assessment 43 percent of those eligible completed a lifestyle

improvement program

CASE STUDY – 236 Bed Hospital

YEAR 2 - 2005 - $500 discount on annual employee health insurance premium

80% of those eligible for the incentive completed the health assessment

79% of those who qualified, enrolled in a lifestyle management program.

CASE STUDY – 236 Bed Hospital

Increase in documented health improvements among repeat participants: 30 percent exercise more times per week; 25 percent have lost 5 pounds or more; 33 percent have seen a blood pressure drop of 4

points or more; 29 percent have lowered their cholesterol by at

least 10 mg/dl.

QUESTIONS?